Transamerica Life Canada says that ING Canada Inc. owes it more than $7.5 million after the Supreme Court’s decision not to intervene in lower court rulings concerning the funding of a company pension fund that Transamerica acquired when it bought NN Life from ING.

Transamerica acquired NN Life Insurance Co. of Canada from ING in April 2000. The NN Life Pension Plan included former employees of Halifax Life, a company NN bought back in the 1980s. After the acquisition of NN, Transamerica questioned whether the surplus in the plan was an asset of the plan, or whether it belonged to former employees of Halifax Life; and it went to court to find out.

The lower court ruled that the assets in the Halifax Life plan were improperly transferred, despite the fact that it was approved by pension regulators at the time; a decision which has effectively been confirmed by the Supreme Court.

As a result, Transamerica says that it is owed about $7.5 million, plus interest and legal fees. It says these damages predominantly cover the monies Transamerica has invested into the plan to properly fund it according to its original terms, the loss of the pension surplus that Transamerica thought it acquired when it bought NN Life, as well as the legal costs it incurred to bring the issue to court.

ING Canada says that it is disappointed by the decision. It maintains that it managed the pension fund in good faith and in a transparent way. “We remain convinced that our interpretation, as well as the one of our advisors, was the right one,” says Gilles Gratton, director corporate communications ING Canada. “At no time, were the interests of the pensioners threatened or jeopardized.”

However, the firm says that it will abide by the decision of the Court of Appeal and will rely on arbitrators and experts to decide on the amount of money that is owed to the NN Life pension fund.

The case has implications for the pension industry. The Financial Services Commission of Ontario has effectively declared a moratorium on pension asset transfers for defined benefit plans as a result of this case. It continues to study the implications of the deal. These issues are explained more fully in the August issue of Investment Executive.

Transamerica says that it is pleased with the court’s decision. “We are very thrilled with the Supreme Court of Canada decision,” George Foegele, chairman, president and CEO of AEGON Canada, the parent company of Transamerica, said in a news release. “We could not have asked for a better outcome than this. The rights of the Halifax Life pensioners have been defended and moreover, pension plan members can be confident that their pension is being administered according to its original terms.”

About 50 pension plan members are helped by the decision. Jane Benn, a plan member, and intervenor in the court application, said in the news release, “It’s just wonderful that we can put closure on this now. We1re very glad that Transamerica took the initiative to take the issue to court. It1s really terrific to know that our pension interests have been protected.”

The pension fund is currently managed by AEGON Capital Management Inc. “This important decision demonstrates that AEGON Canada1s approach to pension fund handling is in keeping with our global reputation that we will carefully administer pension plans and that we will act in the best interests of pensioners,” said Foegele. “The pensioners are clearly the winners.”